2017.2.9
Grace Chiang
The Taipei High Administrative Court rendered the 105-Su-1472 Decision of February 9, 2017 (hereinafter, the “Decision”), holding that when certifying a financial report, a certified public accountant is certainly negligent if the money flows are not diligently verified and the certified auditor’s report is issued before the bank’s close of business.
The Plaintiff in this Decision was a certified public accountant who was penalized with four-month suspension of business practice by the National Federation of CPA Associations of the Republic of China for failure to perform his auditing duty pursuant to the proviso of Article 9, Paragraph 5 of the Regulations Governing Independent Certified Public Accountants Auditing the Registered Capital Amount of Companies (hereinafter, the “Regulations”). As a result, the Plaintiff brought an administrative action against such penalty.
According to the Decision, when auditing a company’s registered capital, the Plaintiff failed to verify with the bank as to whether the deposit had been utilized after auditing the bank book of the client and issued a certified auditor’s report without waiting for the close of business of the bank. This was sufficient to indicate that the Plaintiff obviously failed to verify if the subscription payment was received in full and was not utilized. In addition, although the Plaintiff had informed the agent (i.e., the book-keeping agent) that the subscription payment could not be utilized on that day, a certified public accountant should have thoroughly verified this matter as part of his professional certification work to prevent misinformation from the client instead of depending on whether the client follow the advice not to utilize the deposit. However, the Plaintiff failed to verify money flows diligently and issued a certified auditor’s report before the close of business of the bank because the client was an old client. Therefore, even if the Plaintiff was not intentional, he was still negligent.
This Decision also pointed out that since the Plaintiff merely contacted the book-keeping agent without reaching his client directly, such behavior seriously violated the professional code of ethics of certified public accountants, and the materiality of such violation was not reduced by the fact that the client’s capital for certification was merely NT$1 million; accordingly, the original penalty was not unlawful and the Plaintiff’s complaint was dismissed.